December sales rose 8.5% year-to-year but fell 4.6% month-to-month. NAR economist calls it “a sign of supply constraints” rather than “weakened demand for housing.”
U.S. existing-home sales declined in December, snapping a streak of three straight months of gains, according to the National Association of Realtors® (NAR).
Each of the four major U.S. regions included in the full report saw sales fall in December both month-over-month and year-over-year. Despite the drop, however, overall sales for 2021 increased 8.5% compared to 2020.
U.S. existing-home sales for the month of December – completed transactions that include single-family homes, townhomes, condominiums and co-ops – dropped 4.6% compared to November at a seasonally adjusted annual rate of 6.18 million. Year-over-year, sales fell 7.1% (6.65 million in December 2020).
“December saw sales retreat, but the pullback was more a sign of supply constraints than an indication of a weakened demand for housing,” says Lawrence Yun, NAR’s chief economist. “Sales for the entire year finished strong, reaching the highest annual level since 2006.”
Yun, however, expects existing-home sales to slow slightly in the coming months due to higher mortgage rates, however any drop for that reason might be mitigated some by recent employment gains – and stricter underwriting standards ensure home sales are in no danger of crashing. He forecasts mortgage rates to remain below 4% by year-end and wages to hold firm due to a tight labor market.
“This year, consumers should prepare to endure some increases in mortgage rates,” Yun cautions. “I also expect home prices to grow more moderately by 3% to 5% in 2022, and then similarly in 2023 as more supply reaches the market.”
Total housing inventory at the end of December amounted to 910,000 units, down 18.0% from November and down 14.2% from one year ago (1.06 million). Unsold inventory sits at a 1.8-month supply at the present sales pace, down from 2.1 months in November and from 1.9 months in December 2020. Economists generally consider a 6-month inventory to be a balanced market between buyers and sellers.
“We saw inventory numbers hit an all-time low in December,” Yun says. “Homebuilders have already made strides in 2022 to increase supply, but reversing gaps like the ones … will take years to correct.”
The median existing-home price for all housing types in December was $358,000, up 15.8% from December 2020 ($309,200), as prices rose in each region. The South, which includes Florida, saw the highest pace of appreciation. December also marks 118 straight months of year-over-year increases, the longest-running streak on record.
Properties typically remained on the market for 19 days in December, one day more than the 18 days seen in November, and down from 21 days in December 2020. Four out of five homes sold in December 2021 (79%) were on the market for less than a month.
First-time buyers were responsible for 30% of sales in December, up from 26% in November and down from 31% in December 2020.
“There was a significant surge in first-time buyers at the end of the year,” Yun says. “With mortgage rates expected to rise in 2022, it’s likely that a portion of December buyers was intent on avoiding the inevitable rate increases.”
Individual investors or second-home buyers, who make up many cash sales, purchased 17% of homes in December, up from 15% in November and up from 14% in December 2020. All-cash sales accounted for 23% of transactions in December, down from 24% in November, and up from 19% from December 2020.
Distressed sales – foreclosures and short sales – represented less than 1% of sales in December, equal to the percentage seen in both November 2021 and December 2020.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 3.10% in December, up from 3.07 in November. The average commitment rate across all of 2021 was 2.96%.
Single-family and condo/co-op sales: Single-family home sales dropped to a seasonally adjusted annual rate of 5.52 million in December, down 4.3% from 5.77 million in November and down 6.8% from one year ago. The median existing single-family home price was $364,300 in December, up 16.1% from December 2020.
Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 660,000 units in December, down 7.0% from 710,000 in November and down 9.6% from one year ago. The median existing condo price was $305,100 in December, an annual increase of 11.9%.
“We wrapped up the year witnessing home sales exceed the previous year’s total and saw millions of families secure housing,” says NAR President Leslie Rouda Smith, a Realtor® from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas. “I think the positive momentum will continue as the market prepares to finally see more supply in the coming months, meaning more buyers will be able to land their dream home.”
Regional breakdown: Existing-home sales in the Northeast fell 1.3% in December, registering an annual rate of 750,000, a 15.7% decrease from December 2020. The median price in the Northeast was $384,600, up 6.3% from one year ago.
Existing-home sales in the Midwest slid 1.3% to an annual rate of 1,500,000 in December, a 2.6% decline from a year ago. The median price in the Midwest was $256,900, a 10.0% climb from December 2020.
Existing-home sales in the South retreated 6.3% in December, posting an annual rate of 2,700,000, a drop of 5.3% from one year ago. The median price in the South was $323,000, a 20.2% rise from one year prior.
Existing-home sales in the West decreased 6.8%, reporting an annual rate of 1,230,000 in December, down 10.2% from one year ago. The median price in the West was $507,100, up 8.4% from December 2020.
Source: Florida Realtors®